Tony Company sells a piece of equipment for $20,000 cash.The equipment has a historical cost of $60,000 and accumulated depreciation of $50,000.What is the gain or loss on sale of the equipment?

Question

Quizplus · Accepted Answer

To calculate gain or loss, we need to compare the selling price ($20,000) with the equipment's book value. The book value is the historical cost of the equipment minus its accumulated depreciation. 
Book Value = Historical Cost - Accumulated Depreciation
Book Value = $60,000 - $50,000
Book Value = $10,000
Since the selling price is greater than the book value, this results in a gain on the sale of the equipment. 
Gain/Loss = Selling Price - Book Value
Gain/Loss = $20,000 - $10,000
Gain/Loss = $10,000 
Therefore, the answer is B) $10,000 Gain.

Tony Company Sells a Piece of Equipment for $20,000 Cash